A Conversation With ... Dan Holt

What are some of the key indicators of the housing industry in our area, like average homes sales and days on market?
The data I’m pulling is Greene County, Christian County and Webster County. These numbers are basically June 2023 over June 2022. Although we’re feeling the market pull back as far as total number of homes sold, the average increase in sales price is actually up 3.8%. In June 2023, it’s actually $275,000. Interesting, homes are still listing at 5% higher though. We try to identify a market as a buyer’s market versus a neutral market versus a seller’s market. How I really see it is that zero to four months on market, I would still call it seller’s market. Four months to six months of average days on market, I kind of call a neutral market. Anything over six months average days on the market, which we really haven’t seen since 2007, 2008, 2009, that I would describe truly as a buyer’s market. Average days on market in 2022 was less than 10 days. As an average [in June 2023], it’s 19 days on market. We’re still in a phenomenal market. But here’s the really interesting number in all of that. Last June versus this June, 6% less homes going on the market [and] homes under contract only decreased 4.8%. The homes that sold, meaning the homes that closed, that number, however, went down 20%. That is a red flag. The number was 756 versus 604.

Why is that?
The previous 36 months, we saw the largest appreciation in residential real estate that we’ve probably ever seen. Actually, we saw a larger decrease in the value of the dollar is really what we saw, because really what we’re talking about is inflation. The federal government really wants to stay in a balanced market because at any point in time when buyers have leverage over sellers or sellers have leverage over buyers, it unbalances the market. When it unbalances the market, it causes things like homes to sit on the market too long. They really want that number to stay between four and six months. The No. 1 way that they control that is by affecting interest rates. We’re still in a very strong seller’s market. When homes are rapidly increasing in value, so people are gaining massive amounts of equity in their homes, and they can still get 3.5% to 4% interest, the moves become moves of luxury. Since approximately 12 months ago, the interest rates were hovering around 4%. Basically, in a 30- to 45-day period, they went to 6% and they bounced as high as 8%. What we have is people that are in their homes and they’re sitting at, some of them, below 3% interest rates. The average interest rate has made the affordability index skewed. What we’re seeing more than I want to sell out of pure desire is more the I have to sell because there’s been a lifestyle change.

The Federal Reserve increased interest rates by a quarter of a percent (July 26). The National Association of Realtors officials say these bumps are causing home sales to fall and they don’t feel like this is having the desired effect. Do you think this rate level is the new normal? Is that what you’re coaching clients to understand?
If you look historically over time, we can go probably back to the early ‘70s, the average over 50 years is 6%. My parents tell the story and people that were in the industry then talk about in the ‘70s and even early ‘80s when interest rates went as high as 19% and the struggles that they dealt with in the real estate market. And yet there were still homes that sold. What conditioned us that 6% and 8% are high is that we had 10 years of historically the lowest interest rates that we’ve ever seen. The perception is that interest rate is more important than purchase price. I did not make this term, but the term has been: Marry the house, date the rate. You can change the interest rate but you cannot change your entry price on the asset. A year ago, the $250,000 house may have been selling for $300,000, but the interest rate was 4%. So, they were paying $50,000 over, and these are just hypothetical numbers but it was a reality I saw, and now they can actually get the home at or slightly below list price but they might be between 6% and 8%. But the 6% and 8% is causing hesitation because the appearance is that the most important part is interest rate, not the purchase price. I believe the value in the entry point for the home is better now than it was for the last two years. I don’t see them going back to 4%.

What about the first-time homebuyer? What does the inventory look like for what they can access?
It’s actually a better time for first-time buyers than ever. Traditionally, first-time homebuyers are utilizing loan structures such as low down payment loan structures; some of those can be conventional loans, but a lot of them are using government-assisted loans. For that two-year period I was talking about when we had the largest economic expansion, when we were getting multiple offers on homes, often the ones that the sellers would choose were all cash or they had no appraisal contingencies. First-time buyer purchases, typically they have not had as large of a down payment and they’re going to have to have an appraisal. They put a lot of potential points in the contract that could cause it to have either struggles, renegotiate or fall apart. It was really sad to see, but a lot of those buyers didn’t get a chance. Now, they actually have a better chance.